SEC Form 20-F - Deutsche Bank Annual Report 2012

Deutsche Bank
Annual Report 2010 on Form 20-F
Operating Results (2010 vs. 2009)
Item 5: Operating and Financial Review and Prospects 52
You should read the following discussion and analysis in conjunction with our consolidated financial statements.
Executive Summary
The Global Economy
Following the marked contraction in 2009, with a decline of almost 1 % in global GDP, the world economy grew
again by an estimated 4.75 % in 2010. Three factors played a major role in this development: stimuli from
expansive monetary and fiscal policies, investments that had been postponed in 2009 and were subsequently
made in 2010, and the building up of inventory. However, momentum has slowed since around autumn 2010
as the effect of these factors tailed off.
While the U.S. economy is estimated to have grown by almost 3 % on average during 2010, the eurozone
continued to lag behind in the global economic recovery with real growth of just 1.75 %. In some countries of
the eurozone, the dampening effects of massive consolidation programs, and structural adjustments, especially
in the real estate sector, made themselves felt. In addition, despite financial aid for Greece and Ireland and
plans to establish a permanent crisis mechanism, by the end of the year concerns had increased in the financial
markets about the long-term solvency of some countries of the eurozone. In line with this, there was a dramatic
widening in yield spreads between government bonds from these countries and German government bonds.
By contrast, the German economy – supported by strong stimuli stemming from external trade and also from a
recovering domestic economy – expanded by 3.6 %, the highest growth rate since reunification. The German
labor market continued to develop extremely favorably compared with that of other countries.
The emerging market economies grew by an estimated 7.5 % last year, compared with 2.5 % in 2009.Growth in
the Asian emerging markets was probably even close to 9.5 %. In China, where the pace of growth had slowed
only slightly in 2009 to 8.7 %, the economy grew by 10.3 % in 2010.
The Banking Industry
Three key issues dominated the global banking sector in the past year – business recovery after the slump
during the financial crisis, preparations for the most extensive legal and regulatory reforms in decades, as well
as the growing risks associated with high sovereign debt in many industrial countries.
In operating terms, banks made good progress overall, albeit from a low base. In traditional lending business,
loan loss provisions reduced significantly, though the absolute burden was still high. At the same time, 2010
saw a stabilization in loan volumes, which had contracted the year before, thanks to a slight rise in demand.
This was at least in part attributable to central banks’ continuing expansionary monetary policies.
Capital markets business produced mixed results compared with the very good performance of 2009. The
volume of corporate and sovereign bond issues fell slightly over the high prior year figure, though high-yield
paper issuance volumes rose. Equity issuance stayed robust, with growth especially strong in initial public
offerings. The M&A business gained traction, but remained weak. Overall, investment banking saw a return of
market participants who had cut back their activities during the financial crisis. This led to more intense competition
and narrower margins.
In asset management, banks benefited from rising valuations in most asset classes and from higher inflows. In
transaction business they profited from the economic recovery and a dynamic rebound in world trade, nearly to
pre-crisis levels.